LLQP practice exams

A deceased insured's policy had an outstanding policy loan of $15,000. The beneficiary argues the loan should be paid by the estate, not deducted from her benefit. Who is right?

• AThe insurer forgives the loan at death
• BThe beneficiary: loans are always estate debts
• CThe estate and the beneficiary split the loan
• DThe insurer deducts the loan from the benefit

The loan is secured by the policy itself.

A death benefit is paid to the insured's estate rather than to a named beneficiary. Does this make it taxable as income?

• AOnly if the estate is worth more than $1 million
• BYes: the heirs pay income tax on their share
• CYes: it is added to the deceased's income on the final return
• DNo: it stays tax-free, but probate fees may apply

Distinguish income tax from probate costs.

Under the Insurance Acts, a person generally has an insurable interest in the life of which of these people?

• AA public figure they admire
• BAny neighbour, if the premium is paid
• CAny person at all, as long as the insurer agrees to issue the policy
• DA spouse, a child, or a person on whom they depend for support

Think about a financial or family loss.

A client stops paying premiums and chooses extended term insurance on his $200,000 whole life policy. What does he get?

• AA smaller amount of coverage for life
• BHis cash value in cash
• C$200,000 of coverage for a limited period that the cash value can buy
• DThe same policy, with all future premiums paid automatically by policy loans

Which stays the same — the amount or the duration?

In 2020, a policyowner named his first wife as revocable beneficiary on the insurer's form. In 2024, he made a new will that refers to the policy by its number and names his children. He dies in 2026. Who generally receives the benefit?

• AHis children, because the will is the later designation
• BHis estate, because of the conflict
• CHis first wife and the children equally
• DHis first wife, because insurer forms prevail over wills

Which designation was made last?

A policy contains a two-year suicide exclusion. The insured dies by suicide 18 months after issue. What does the insurer generally pay?

• AThe full death benefit
• BNothing at all
• CA refund of the premiums paid
• DHalf of the death benefit

The exclusion does not leave the family with nothing.

Which of these is a usual dividend option on a participating policy?

• AConverting dividends into shares of the insurer
• BApplying dividends to the agent's commission
• CPaying dividends to the beneficiary each year
• DUsing dividends to buy one-year term insurance

Dividend options either pay, reduce, accumulate or buy insurance.

What is the main role of the Office of the Superintendent of Financial Institutions (OSFI) in insurance?

• ALicensing life insurance agents and setting their continuing education rules
• BHandling consumer complaints about agents and insurers in each province
• CSetting the content and pass mark of the LLQP exams
• DSupervising the solvency of federally regulated insurers

Think about the financial strength of the company, not the conduct of the agent.

An insured returns to work after a disability, then relapses from the same cause four months later. The policy has a six-month recurrent disability clause. What applies?

• AA new claim starts, with a new elimination period and a new maximum benefit period
• BBenefits restart at half the original amount
• CThe relapse is a continuation, with no new elimination period
• DThe relapse is excluded, since he returned to work

The clause links relapses within a set period to the original claim.

What is the main difference between a career (captive) agent and an independent agent working through an MGA?

• AThe career agent places with one insurer; the independent agent with several
• BThe career agent needs no provincial licence, because the insurer supervises him
• CThe independent agent represents the client and never acts for any insurer
• DOnly the career agent may sell segregated fund contracts

Count the insurers whose products each can place.

Under the common-law Insurance Acts, which conditions must generally be met for a life insurance contract to take effect?

• ADelivery of the policy, payment of the first premium, and no change in insurability
• BApproval by the insurer's underwriter, even if the policy is never delivered
• CSignature of the policy by the beneficiary
• DSignature of the application and booking of the medical exam, even without any payment

Three conditions are linked to delivery.

In a group life claim, who usually completes the employer's part of the claim?

• AAssuris
• BThe beneficiary's bank
• CThe deceased's doctor
• DThe plan sponsor (employer)

The employer confirms coverage and earnings.

A critical illness policy pays $100,000 after a 30-day survival period. The insured is diagnosed with a covered cancer and survives 45 days, then dies. Her husband is the beneficiary of a separate life policy. What does the CI policy pay?

• A$50,000, half for each month she survived
• BNothing, since she died soon after
• COnly a refund of premiums, because she died
• D$100,000, since she met the survival period

Check the survival period, not the later death.

A client asks his agent: "How much do you earn if I buy this policy?" What is the most appropriate reply?

• ASay that he earns nothing, since the client pays only the premium
• BSay that the amount is fixed by law and identical for every insurer
• CExplain how he is paid and that commissions come from the insurer
• DRefuse to answer, since compensation is confidential between the agent and the insurer

Transparency builds trust.

A beneficiary is convicted of murdering the insured. What happens to his entitlement to the death benefit?

• AHe cannot benefit from his crime; the money goes as if he had predeceased
• BHe receives half, the other half going to the estate
• CThe insurer keeps the money as a penalty
• DHe receives the benefit, since he was validly named before the death

Public policy prevents a person from profiting from a wrongful killing.

Why are life insurance contracts said to be of "utmost good faith" rather than ordinary good faith?

• AThe insurer relies almost entirely on what the applicant discloses about the risk
• BBecause only the insurer signs the policy
• CBecause premiums are paid in advance and can never be refunded to the policyowner
• DBecause the courts never review them

Who knows the most about the risk at the time of application?

What are the main consequences of surrendering a whole life policy for its cash value?

• ACoverage continues at a reduced amount
• BNothing is taxable, because it is the client's own money coming back to him
• CThe beneficiary receives the cash value
• DCoverage ends, and any amount above the ACB is taxable as a policy gain

Two consequences: one on coverage, one on tax.

A client emails his agent to complain that he was never told about the surrender charges on his policy. What should the agent do?

• ADelete the email, since the client signed the illustration showing the charges
• BReply that complaints must be sent directly to the regulator
• CAcknowledge it, follow the complaint process and keep a record
• DIgnore it unless the client writes a second time

Complaints must be handled, not avoided.

Hélène owns a policy on the life of her adult son Marc; her daughter is the revocable beneficiary. Marc wants the beneficiary changed to his wife. Who can make the change?

• AThe daughter
• BHélène, the policyowner
• CMarc, the life insured
• DMarc's wife

Who holds the rights under the contract?

What does the "entire contract" provision protect the policyowner against?

• APremium increases that the insurer might decide after the policy has been issued
• BA change of agent
• CInflation
• DDocuments not attached to the policy being used later to change its terms

Only what is in the contract counts.